Breast epithelial stem cells are thought to be the primary targets in the etiology of breast cancer. Since breast cancers are predominantly steroid receptor-positive, we tested the hypothesis that normal human breast epithelial stem cells include a steroid receptor-positive population. Based on studies in hematopoietic and other tissues, we isolated a breast epithelial side population (SP) reported to be enriched in stem cells. Fluorescence-activated cell sorting analysis indicates that 5% of breast epithelial cells are SP in nature. Seventy per cent of SP cells lack markers of myoepithelial (CALLA) and luminal cells (MUC1), suggesting that they are undifferentiated. This is consistent with reports that breast stem cells are CALLA-/MUC1- and express cytokeratin (CK) 19. In three-dimensional matrigel culture, SP (but not non-SP) cells produce branching structures similar to lobules. These structures comprise at least two cell populations expressing either CK14 (myoepithelial) or CK18 (luminal), suggesting that SP cells include a population with the potential to differentiate. Next, we analysed the relationship between steroid receptor expression, proliferation and CK19 expression. Results show that only 10–20% of breast epithelial cells contain receptors for estrogen and progesterone (ERa and PR), that these cells (70–80%) are in an intermediate/suprabasal position, are rarely proliferative and co-express CK19 providing evidence for ERa/PR expression by stem cells. These data are supported by the finding that SP cells are six times more likely to express steroid receptors than non-SP cells (60% versus 10%). Another population enriched for stem cells, the label retaining cells, express the putative stem cell markers Musashi-1 (Msi1) and p21CIP1, and are also ERa/PR-positive, although Msi1 and p21CIP1 are never co-expressed, suggesting that these molecules have separate functions in stem cell regulation. The data suggest that ERa/PR-positive human breast epithelial cells include a stem cell population and thus steroid receptor-positive breast cancers may arise from steroid receptor-positive stem cells present in the normal breast epithelium.